Explaining Southern California's economy

Why are politicians fixated on a 'simple' tax code?

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kenteegardin/Flickr

Pictured: the advanced technology used to calculate the nation's taxes.

Herman Cain has his 999 plan. It's so much simpler than the excessively complex system we have now. Rick Perry just unveiled his 20-20 plan, which is also so much simpler than the excessively complex system we have now. And just today, I heard California Senator Dianne Feinstein support a recommendation, from Erksine Bowles and Alan Simpson's Deficit Commission, to reduce out current six tax brackets to three: 12, 20, and 27 percent (the top rate is now 35 percent).

Simplicity, it seems, sells. But why?

If anything, federal taxes are far easier to file than ever. I used TurboTax for the first time this year and, once I had gathered all my documents, the process consumed about an hour. In 1979, however, long before TurboTax came along, people managed to deal with 17 tax brackets, using a Bic ballpoint and calculator. In 1945, they confronted 24 brackets with nothing more than a No. 2 pencil, a pad of paper, a pack of Lucky Strikes, and stiff drink.

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Rick Perry's Bizarro World tax plan

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Win McNamee/Getty Images

GOP Presidential Candidate Rick Perry

I honestly didn't think anyone could — or would — come up with a worse plan for U.S. tax reform than Herman Cain did with his 999 proposal. But Texas Gov. Rick Perry just released his "Cut, Balance and Grow" plan, which is also being referred to as the "20-20" plan, echoing Cain's 999. The difference is that Perry replaces Cain's 9 percent flat income and corporate taxes with a 20 percent flat tax for both. But there's more! And just in time for Halloween, it's...terrifying!

I'd like to call it stupid, but ridiculously stupid would be better.

The plan has four key pieces:

  1. Americans will be able to choose between the current tax system and the 20-percent flat tax. 
  2. Corporations will see their tax rate cut from an average of 35 percent under the current system to a flat 20 percent with Perry's plan.
  3. Federal spending would be capped at 18 percent of GDP, which Perry argues is the average since 1960. This will, he insists, balance the budget by 2020.
  4. Workers would be able to opt out of Social Security.

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Herman Cain says his plan to reform Social Security worked for Chile, but can it work in the USA?

Herman Cain is now polling alongside perpetual Republican kinda sorta frontrunner Mitt Romney. Today, KPCC's AirTalk did a segment on the sudden arrival of the Cain Train. Time to get up to speed on everything the pizza king stands for, and fast! Yesterday, it was the 9-9-9 plan to reform the tax system. Today, it's Cain's scheme to fix Social Security.

In the CNN/Tea Party Debate, Cain said his plan could copy the "Chilean Model" (see the above video). So what does that mean?

It means privatizing Social Security, as Chile did in the early 1980s. José Piñera, the Chilean government official who oversaw the conversion of his country's social security system from its classic model to one based on private investment accounts, explained how and why he did it, back in 1997 (his account now lives on the Cato Institute site).

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Mitch Daniels dangerously misrepresents Social Security

The "Social Security is a Ponzi scheme" argument just won't go away. You'll recall that Rick Perry got in trouble for rehashing this allegation, made in his book, during a GOP candidates debate at the Reagan Library. Republicans then pivoted slightly, moving away from Perry's extreme view, toward their more traditional position: that Social Security needs to be "reformed." 

The last time the GOP took a serious crack at reforming Social Security, George W. Bush was in the White House, and he put before Congress a proposal to privatize a portion of Social Security, insisting that investment returns were the best way for Americans to keep the system solvent.

Now Mitch Daniels has taken up the charge. Or I should say re-taken-up the charge, as the Indiana Governor, who's being touted as a possible vice-presidential pick, has been a critic of Social Security going back to the days when he was…George W. Bush's Director of the Office of Management and Budget.

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Econ 474: Why does the Tea Party think Ben Bernanke is a traitor?

This week's Republican candidates debate, presented by CNN and sponsored by the Tea Party, featured a moment when Texas Gov. Rick Perry was cheered for restating his rather negative views of Federal Reserve Chairman Ben Bernanke. This is from Talking Points Memo:

[H]ost Wolf Blitzer brought up Gov. Rick Perry’s comments that Federal Reserve Chairman Ben Bernanke’s emergency economic policies “almost treasonous.” Perry stood by the comment…“I am not a fan of the current chairman allowing that Federal Reserve to be used to cover up bad fiscal policy by this administration,” Perry said. “And that, I will suggest to you, is what we have seen.”

Perry continued:

“It is a travesty that young people in America are seeing their dollars devalued in what…we don’t know if it was political or not because of the transparency issue,” Perry said. “But I stand behind this: we need to have a Fed that’s working towards sound monetary policy, that creates a strong dollar in America, and we do not have that today.”

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